Rajaratnam, SocGen, Blackstone, S&P, AT&T in Court News

By Elizabeth Amon -
Oct 4, 2011

Raj Rajaratnam, the hedge fund
manager convicted of directing a massive insider-trading ring,
opposed a government request to unseal data about his medical
condition, claiming it would only fuel a “media feeding
frenzy.”

The public has no right to the information submitted to the
court in a bid for leniency, Rajaratnam’s lawyers, led by John
Dowd, argued in papers filed in Manhattan federal court
yesterday. Rajaratnam is to be sentenced by U.S. District Judge
Richard Holwell Oct. 13

“The idea that Mr. Rajaratnam’s interest in keeping his
medical conditions private must yield to the public’s prurient
interest in such intimate details is absurd,” the lawyers
wrote. “No defendant should be forced to choose between
providing the court with medical information relevant to
sentencing and making himself the subject to a salacious and
morbid media feeding frenzy.”

The government is urging Holwell to give Rajaratnam, the
co-founder of Galleon Group LLC, 19 1/2 to 24 1/2 years in
prison. Rajaratnam’s lawyers, calling the government’s proposal
“grotesquely severe,” asked for a sentence “substantially
below” that.

Kerviel Appeal on SocGen Trading Verdict Scheduled for June

A Paris appeals court yesterday set the appeal hearings to
run from June 4 to June 28. Kerviel didn’t attend yesterday’s
session.

While Kerviel said during the trial that his activities
were “probably not” part of his mandate, his lawyer Olivier
Metzner said yesterday that he is appealing all three guilty
counts -- breach of trust, forging documents and computer
hacking.

Kerviel, 34, was held solely responsible for the loss in
the 2010 verdict. The judges rejected his arguments that his
superiors at the bank, France’s second largest, knew he had
trades that exceeded his limits and that it was the bank’s
decision to unwind the bets over three days of falling markets
in 2008 that caused such a large loss.

Kerviel was “crushed” by the verdict, he said after the
decision. Metzner criticized the ruling, saying the bank should
have reduced the loss it claimed because of a 1.7 billion-euro
deferred tax credit it received. The 4.9 billion-euro figure was
the difference between the 6.38 billion euros the bank lost
unwinding the positions and Kerviel’s 2007 trading profit of
1.47 billion euros.

Societe Generale said after the ruling it had “learned its
lessons” from the episode and improved its risk controls. A
spokeswoman for the bank declined to comment on the appeal
yesterday.

Premier League Risks Blow to BSkyB TV-Rights at EU’s Top Court

English soccer’s Premier League and European governing body
UEFA risk losing part of their revenue from exclusive television
rights sold to broadcasters such as British Sky Broadcasting
Group Plc (BSY) in a ruling by the European Union’s highest court
today.

The EU Court of Justice in Luxembourg is set to decide
whether the Premier League’s exclusive regional contracts to
televise its soccer matches are lawful. An adviser to the court
in a non-binding opinion in February said they are not.

The Premier League is home to some of Europe’s most
successful clubs including Manchester United and Liverpool. The
league started a three-year 1.8 billion-pound ($2.8 billion)
U.K. television contract in August 2010, and receives a further
1.4 billion pounds from the sale of international broadcast
rights.

“The biggest fallout is probably for the Premier League,”
Daniel Geey, a lawyer at Field Fisher Waterhouse LLP in London.
“Their 1.8 billion-pounds contract, of which they’re in the
second year of three, could potentially be deemed illegal and
have to be renegotiated.”

The EU court case was partly triggered by a U.K. dispute
involving Karen Murphy, the owner of the Red, White and Blue Pub
in Southsea, close to Portsmouth, England. She faces a criminal
lawsuit after buying a decoder card that allows her to show
Premier League games from Greek television. BSkyB, the U.K.’s
biggest pay-TV operator, said the cards are “illicit” because
they are being used outside their specified area.

Today’s EU judgment is “going to determine the way in
which broadcasting rights generally, not just live-football, are
marketed in the EU for generations to come,” Paul Dixon,
Murphy’s lawyer, said in a phone interview.

Energy Transfer filed suit in Texas state court on Sept.
30, a day after Enterprise announced the new pipeline project
with Enbridge Inc. (ENB) Energy Transfer, based in Dallas, alleges
breach of contract, breach of fiduciary duty and unfair
competition in the lawsuit, which also accuses Enbridge of
interference.

Enterprise, the biggest U.S. pipeline operator, proposed a
joint venture with Energy Transfer in April to build a 400,000-barrel-a-day oil conduit from Cushing, Oklahoma, to Houston.
Enterprise, based in Houston, called off the so-called Double E
pipeline on Aug. 19 citing a lack of sufficient customer
interest.

The company announced a partnership with Calgary-based
Enbridge on Sept. 29 to build an 800,000-barrel-a-day pipeline
between the two cities. That project is known as the Wrangler
pipeline.

Enterprise tried to persuade Energy Transfer “to terminate
the joint venture due to the new pipeline’s supposed lack of
commercial viability, while simultaneously plotting to establish
a new joint venture to build the same pipeline,” Energy
Transfer said in its complaint.

“When Enterprise could not persuade Energy Transfer to
terminate the joint venture, Enterprise simply pretended that
the joint venture never existed,” according to the complaint.

The lawsuit is “frivolous” and Enterprise will seek to
have it dismissed, Rick Rainey, a company spokesman, said in an
e-mailed statement.

Larry Springer, a spokesman for Enbridge, said the company
doesn’t comment on pending lawsuits.

For the latest new suits news, click here. For copies of recent
civil complaints, click here.

Lawsuits/Pretrial

Moody’s, Fitch, S&P Must Face New Mexico Securities Lawsuit

Moody’s Corp. (MCO), Fitch Inc. and Standard & Poor’s must face
claims in a lawsuit brought by investors in mortgage-backed
securities that they violated New Mexico securities law.

U.S. District Judge James O. Browning in Albuquerque, New
Mexico, in a Sept. 30 order denied the rating companies’ request
to dismiss the claim against them. The judge didn’t provide his
reasons for the ruling, saying he will issue a detailed opinion
later.

The plaintiffs, led by the Maryland-National Capital Park &
Planning Commission Employees’ Retirement and the Midwest
Operating Engineers Pension Trust Fund, filed an amended
complaint in December, seeking to represent other investors in
$5 billion of Thornburg Mortgage Home Loans Inc. mortgage-backed
securities.

The investors allege that the rating companies gave the
securities false and misleading AAA or Aaa ratings.

In a Feb. 11 request to dismiss the claim, lawyers for the
rating companies said every court has rejected efforts to hold
them liable under federal securities law.

The plaintiffs’ claim under New Mexico law was a “blatant
attempt to avoid the parade of recent decisions that have
rightly held that issuing credit ratings is not the same thing
as selling or underwriting securities,” according to the filing
by the companies.

Browning also granted and denied in part motions to dismiss
by the underwriters and other defendants.

“Moody’s believes the lawsuit is without merit and remains
confident the claims against it will ultimately dismissed,”
Michael Adler, a spokesman for the New York-based company, said
in a phone interview.

Ed Sweeney, a spokesman for Standard & Poor’s in New York,
had no immediate comment on the ruling. Sandro Scenga, a
spokesman for Fitch, didn’t return a call to his office seeking
comment.

The case is Genesee County Employees Retirement System v.
Thornburg Mortgage Securities Trust 2006-3, U.S. District Court,
District of New Mexico (Albuquerque).

Blackstone Rejected by U.S. Supreme Court on IPO Lawsuit

The U.S. Supreme Court refused to halt a proposed investor
class-action suit that accuses Blackstone Group LP (BX), the largest
private-equity firm, of making inadequate disclosures before its
2007 initial public offering.

The justices yesterday turned away an appeal from
Blackstone, leaving intact a federal appeals court’s conclusion
that the complaint made plausible allegations that the company
omitted material information in its initial public offering
prospectus and registration statement. The rebuff lets the
litigation move ahead to the evidence-gathering stage.

The investors claim Blackstone Chairman Stephen Schwarzman
and other officials knew about problems at two companies in
which the New York-based firm had a stake, including one that
issued securities tied to subprime mortgages.

The complaint also alleges that Blackstone misrepresented
the prospects for its real estate investments by stating in its
registration statement that the industry “is experiencing
historically high levels of growth and liquidity.”

The case is Blackstone Group v. Litwin, 11-15, U.S. Supreme
Court (Washington).

Singapore Pledges Jail, New Tactics for Financial Criminals

Singapore, where assets under management have risen
fivefold to $1.2 trillion since 2001, will seek tougher
penalties for white-collar criminals and co-operate more with
global agencies to deter money laundering and tax evasion,
Attorney General Sundaresh Menon said.

Prosecutors are also considering the use of deferred
prosecution, Menon, 49, said in an interview, a year after
taking office. He was referring to a commonly used method in the
U.S. under which defendants who agree to cooperate with
investigators, pay fines or implement corporate reforms have
charges against them dismissed if they fully comply.

The Asian city-state, which has the highest proportion of
millionaires of any place in the world and with economic growth
of 14.5 percent last year boosted by two new casinos, was
criticized in a March U.S. State Department report as being
vulnerable to money launderers.

Menon dismissed suggestions from the U.S. March report that
Singapore’s bank secrecy laws attract tax evaders and money
launderers.

For more, click here.

Icelandic Court Dismisses Some Charges Against Former Premier

An Icelandic court dismissed two of six charges against
former Prime Minister Geir H. Haarde, limiting the scope of a
trial designed to determine his culpability in the island’s 2008
banking crisis.

Landsdomur, a special court convening for the first time
since its creation in 1905, threw out charges alleging the
former premier had neglected his duty as the head of government
and for failing to ensure the government studied the risks
facing Iceland’s banks.

Haarde will continue to stand trial on charges that he
failed to force the country’s bank industry to shrink and for
neglecting to ensure that Landsbanki Islands hf established
subsidiaries outside Iceland to protect the country from foreign
depositor claims. Two other smaller charges were also upheld.

For the latest lawsuits news, click here.

Trials/Appeals

Exxon Says Punitive Awards in Gas-Leak Case Were Excessive

Exxon Mobil Corp. (XOM) shouldn’t be forced to pay more than
$1 billion in punitive damages over a 2006 gasoline leak in
Maryland that allegedly fouled residents’ drinking water,
lawyers for the world’s largest publicly traded energy company
argued in court.

The punishment damages, handed down in June to 160
homeowners and businesses as part of a $1.5 billion jury award,
are excessive and weren’t justified based on the facts of the
case, John E. Griffith Jr., one of Exxon Mobil’s attorneys, told
Baltimore County Circuit Judge Robert Dugan yesterday.

“The evidence is totally insufficient to justify” the
awards, Griffin argued in state court in Towson, Maryland.
Dugan, who already has rejected Exxon’s request for a new trial,
said he would issue a written decision on the punitive-damage
awards later.

The $1.5 billion verdict in the environmental case was the
second-largest in the U.S. this year and the 21st-largest of all
time, according to data compiled by Bloomberg. Officials of
Irving, Texas-based Exxon Mobil have asked Maryland’s appellate
courts to overturn the verdict.

Jurors handed down the verdict on behalf of residents of
the Baltimore County community of Jacksonville for losses tied
to a 37-day gasoline leak from a local station’s tank farm. The
incident sent more than 26,000 gallons of fuel into the area’s
groundwater, according to court filings. The rural community
doesn’t have a public water system and relies on wells for
drinking water.

Supreme Court May Enter 2012 Election With Politicized Docket

The U.S. Supreme Court may be thrust into the 2012 election
campaign with potential cases on President Barack Obama’s
health-care law, illegal immigration and affirmative action in
the term that started yesterday.

The nine-month session already includes fights over police
use of tracking devices and nudity on broadcast television, and
review of the health-care law is likely after the Obama
administration asked last week for a hearing.

The court may increase the stakes by taking up appeals that
aim to limit the use of race by university admissions offices
and bolster the power of states to crack down on illegal
immigration.

“This term could turn out to be one of the most momentous
Supreme Court terms in decades,” said Elizabeth Wydra, chief
counsel of the Washington-based Constitutional Accountability
Center, which advocates for civil rights and broad federal
power.

The court would probably decide the health-care, admissions
and immigration cases at the close of its term in late June,
less than five months before the November election.

Health care alone would create the rare if not
unprecedented scenario of an election-year Supreme Court ruling
on a president’s signature legislative accomplishment. Lower
courts are divided on the constitutionality of the measure and
its requirement that Americans either acquire insurance or pay a
penalty. Both the Obama administration and a group of 26 states
opposing the law filed Supreme Court appeals last week.

For more, click here.

Berezovsky Seeks $5.56 Billion From Abramovich

A trial of Roman Abramovich, the owner of Chelsea Football
Club, began yesterday in London over claims the Russian
billionaire forced his former business partner Boris Berezovsky
to sell shares in an oil company.

Abramovich, one of Russia’s richest men, lost a Court of
Appeals bid to dismiss the lawsuit in February. He has
repeatedly denied the allegations. Berezovsky is seeking damages
of $5.56 billion in the trial, which is scheduled for 16 weeks.

The dispute stems from a business deal to acquire Sibneft
that both men thought “would make them wealthy beyond their
wildest dreams,” Berezovsky’s lawyer Laurence Rabinowitz said
at yesterday’s hearing. The partnership collapsed when
Abramovich decided “wealth and influence were worth more than
loyalty.”

Berezovsky, a Russian billionaire living in exile in the
U.K., claims Abramovich used “threats and intimidation” to
force him to sell shares of OAO Sibneft at a fraction of their
value. Berezovsky sold Abramovich the Sibneft stake for $1.3
billion between 2001 and 2003. Then in 2005, Abramovich sold
Sibneft to state-run OAO Gazprom for $13.1 billion.

Abramovich allegedly told Berezovsky the Russian government
would take the Sibneft shares if he didn’t agree to sell them
and his holdings in the aluminum producer United Co. Rusal. (486)
Berezovsky has lived in the U.K. since seeking asylum in 2001.

S&P Faces Australia Trial Over Ratings of CDOs Sold to Towns

Standard & Poor’s, the rating company being investigated by
U.S. regulators over the nation’s credit downgrade, will face
trial in an Australian court to defend allegations it misled
investors with ratings of collateralized debt obligations, in
the first case of its kind.

Two Australian towns and an insurer sued the U.K. arm of
S&P’s owner McGraw-Hill Cos., along with financial-services
firms including Royal Bank of Scotland Group Plc, who were
involved in the sale of AAA-rated securities that plummeted in
value during the global economic crisis in 2008.

“It is my understanding that this is the first trial
globally, focusing on a rating agency’s involvement in the CDO
debacle that materially contributed” to the global downturn,
John Walker, executive director of litigation funder IMF
(Australia) Ltd., which is paying for the lawsuit, said in an e-mail. Walker declined to comment further until the start of the
trial today.

Statecover Mutual Ltd., a workers’ compensation insurer of
local governments in New South Wales, Bathurst regional council
and Corowa Shire Council seek to recoup the losses they incurred
from the purchase of securities in 2006.

The Bathurst council paid A$1 million ($963,000) to acquire
a so-called Community Income Constant Proportion Debt Obligation
Note, or a CPDO, on Dec. 20, 2006, and was advised less than two
years later that the note was being unwound and the council
would receive a repayment on the note of A$67,043, according to
the statement of claim.

The CPDO note was rated as AAA by S&P, and a financial
market specialist at Local Government Financial Services Ltd.
assured Bathurst’s accountants that the CPDO wasn’t like a CDO,
in which the council had a specific policy not to invest, the
plaintiff said.

“The Standard & Poor’s report was misleading and in
material ways misdescribed the characteristics and operations of
the CPDO note,” according to the filing.

The trial in Sydney Federal Court before Justice Jayne
Jagot is scheduled for 10 weeks.

“We believe the case brought by LGFS and others against
McGraw-Hill UK lacks merit,” S&P said in an e-mailed statement
yesterday. “Because the action is before the Australian courts
it is not appropriate to discuss it.”

Verdicts/Settlements

The U.S. Supreme Court turned away a bid by AT&T Inc. (T) for a
$500 million tax refund in a fight stemming from government
subsidies to the company for serving remote areas.

The justices yesterday left intact a federal appeals court
ruling that rejected the Dallas-based company’s bid for a refund
on its 1998 and 1999 federal taxes.

AT&T received $1.5 billion during those years under the
state and federal “universal service” programs. The company
sought to treat the money as “contributions to capital,” a
classification that would have spread the tax burden over
several years.

The Internal Revenue Service disagreed, saying the company
had to treat the funds as income for the 1998 and 1999 tax
years.

The case is AT&T v. United States, 10-1204, U.S. Supreme
Court (Washington).